Rep. Nadler Proposes The RIAA Bailout Act Of 2012

from the riaa-bailout dept

Ah, the whole fight over licensing and royalty rates for internet radio had been quiet for a little while, but has sprung back up thanks to Rep. Jerry Nadler proposing a music royalty bill that would effectively bump up the rates that cable and satellite radio stations have to pay to make them more aligned with the insanely high rates that internet streamers are supposed to pay (rates so high, and set by a group of judges who don't appear to know what the internet is half the time, that no real business can be built off of them). This is in contrast to a different, but similar, attempt by Rep. Jason Chaffetz to basically bring the internet rates back down to the same rates as those other providers.

Of course, this is all somewhat related to the RIAA's ongoing push for a Performance Rights Act, which would force radio stations to pay extra royalties for when they play music. Under existing law, radio stations only pay the composers/songwriters for songs played on the air, due to the recognition that radio airplay is basically a massive advertisement for the musicians and it's silly to have stations pay the copyright holders for advertising their works. In fact, it's doubly crazy when you realize that the history of radio is filled with pretty indisputable evidence that the major music labels find tremendous value in radio play: payola. Payola is all about the labels increasing the airplay, knowing that it leads to all sorts of revenue elsewhere. But the RIAA is so insanely greedy these days that it's been begging for this form of a "bailout" for quite some time -- seeking to get radio stations to pay them for playing the same music that the labels are paying the stations (indirectly, of course, thanks to all the payola settlements) to play!

These proposals don't directly address that issue, but are clearly based on this idea. In fact, Nadler is incredibly upfront that he views taxing internet radio is his way of making up the money that isn't being collected from terrestrial radio:

“The lack of a performance royalty for terrestrial radio airplay is a significant inequity and grossly unfair. We can’t start a race to the bottom when it comes to royalty rates and compensation for artists," Nadler said in a statement. "The Interim FIRST Act would provide artists with fair compensation for the valuable creations they share with all of us."

In other words, because we can't fund an RIAA bailout off the backs of terrestrial radios (thanks in part to the powerful lobbying of the NAB), we'll instead increase the existing (and already crippling) tax on the useful and innovative services that are trying to help drag the RIAA (kicking and screaming) into the future.

Pandora is, quite reasonably, worried about this turn of events, noting that this new tax would be "astonishingly unfair."

Nadler seems to think that Chaffetz's plan is unfair because it would mean lower royalties from the internet streamers, but that's a gross distortion for a few reasons. First off, it assumes a perfectly static market, which is wrong. Second, it seems to assume that the identical number of services and the identical number of listens will occur. That's not true. As it stands now, the rates are so damaging that Pandora -- the top player in the space -- has made it clear it may never be profitable. Yes, never. Nadler's bill would effectively make sure that no one else in that market would be profitable either. The end result? Many of these services don't exist or never get started. That would actually mean fewer services, fewer listeners and lower royalties.

It's almost as if he has no concept of price elasticity. Lower prices can create higher total income. Also, the idea that any particular Congressional Rep. should be (effectively) determining what the "fair" price is for anything is, well, horrifying.

If these royalties are going to exist, is it really so crazy to think that perhaps (just perhaps) keeping the rates low, to encourage these useful new services to come along and grow, might be a good thing? But, instead, the RIAA and its members are so greedy for the largest payout per music listen, that they're clearly willing to kill off useful legal streaming services like Pandora. In the long run, that's not good (at all) for the record labels and the RIAA, but they've never been particularly good at seeing beyond the price per listen.

Either way, can anyone explain just why the government is bailing out the RIAA in the first place?

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It's not the money they'll be missing from their pockets, it's the cushy jobs they'll get when they finally leave (or get booted out of) Congress that they can use to justify the fact they are still "working" for their money and not simply living of the perks and benefits Congress extols to set them for life.

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Can we just skip to the part where artists pay labels, in advance, for the right to compose their next music?

If you don't pay, then don't complain when the private RIAA copyright police bust down your door, burn your house down, shoot your pet, and fine you for composing music without having paid a copyright license on the music to be composed.

Re: Can we just skip to the part where the artists start paying the labels to perform their own music?

"Either way, can anyone explain just why the government is bailing out the RIAA in the first place?"

Actually, since it would go to all artists, including your friends and fellow flunkies who get their music in the air, it would seem that it's fair to all involved.

Further, let's be fair. Payola is no longer a real deal, because airplay doesn't directly lead to selling more recording anymore. It might lead to selling concert tickets or something, but unless the artist is on a label that has a 360 deal involved, it would be a painful waste of money.

Nice rant, but it shows perhaps that you just don't work in the music industry and have really no clue what is going on anymore.

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I would add a couple of points.

1. The RIAA is merely an industry association. It is not a label, but, among other roles, serves as a lobbying group on behalf of the labels. Of course, those who have business interests that may not intersect with those of the RIAA have their own lobbying groups.

2. This is merely a bill. It most certainly is not legislation passed by Congress and awaiting signature by the President. That would happen, if at all, well into the future.

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Nice rant, but it shows perhaps that you just don't work in the music industry and have really no clue what is going on anymore.

This is the third time in as many days that I've seen a variation on this statement.

You see, it's irrelevant. We may or may not know the inner workings of the big label music biz nowadays, but we absolutely know what they've been doing to society at large.

That is our concern. We are concerned that they behave like honest, forward-thinking businessmen rather than what they do right now. It's not necessary to be an industry insider to recognize bad behavior and push to fix it. In fact, doing that appears to be impossible if you're an industry insider.

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You're wrong. The feudal barons that forced King John of England to sign the Magna Carta were not kings, so they had no clue what was going on. They should have kept their stupid Magna Carta to themselves and let real kings run the country.

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My concern is the pollution of the minds of the people on here with false or at the very best misleading information.

Then you should actually point out the false or misleading information. I don't think this was a good example of that. I'd be surprised if many people were "misled".

But 9 times out of 10, whenever some AC comes here to try and point out something false or misleading, they're either wrong or they're harping on some really minor point that doesn't affect the big picture at all.

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Mike isn't a journalist. He doesn't claim to be. This is not a news site, this is an opinion and discussion blog. If you want news, go check out CNN or the BBC or something, but for gods' sakes, stop assuming this is a news site.

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I'm concerned that you're insulting the intelligence of the readers of this blog. We're perfectly capable of fact-checking and being skeptical of Mike's writing. We're perfectly capable of reading linked articles to see if they support his conclusions. If you spent any time here over the last few years, you'd see that long time readers don't always agree with Mike on every topic. We don't need a patronizing pedant to protect us from what he perceives as misinformation.

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I'm certainly not here to defend them.

And yet that's invariably what you do. Now you would have us believe, in spite of that clear and consistent record, that it's just a coincidence and you really have some other, altruistic purpose? Please.

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yes...and the most important thing...THE RIAA HAS NOTHING TO DO WITH THE COLLECTION OF PERFORMANCE ROYALTIES!

They have nothing to do with this bill. I think Mike knows that when he writes "RIAA" people get all flustered and angry at the world...He exploits the average persons lack of knowledge of the music business and copyright law. It's irresponsible journalism...

Either that or he's unaware that the RIAA (in this case) has no interest and definitely isn't doing ASCAP and BMI a "favor" by lobbying on their behalf...

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Having a royalty for copyright owners on radio-play would just send US of America in line with the rest of the western world. I see no huge conspiracy in it unless we are talking about a worldwide conspiracy.
How high those rates should be? I would never entrust any politician with such a job! Let the recording companies create their own collection societies and let those collection societies negotiate deals with the interest groups for internet radio, broadcast radio and satellite/cable radio. Then we are getting somewhere.

I would like politicians to stay as far away from national regulations in favour of record industry and instead focus on determining how to protect other groups than right holders in copyright law and make international deals with those included. I must be living in a dreamworld?

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I do realize that. However, it's just plain wrong to generalize ASCAP and BMI under the RIAA. They don't represent record labels...they represent artists.

If people in the comment section want to call them the MAFIAA (grow up) all power to them!

Mike, on the other hand, should show a little integrity. After all, he's a journalist, right? he's reporting on issues that mean something to him, right? doesn't he owe it to himself and his readers to not shover enriched BS down their throats?

I'm sorry, but there's no excuse for this flagrantly one sided and poorly explained article.

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I would suggest calling ASCAP and BMI...ASCAP and BMI.

I don't call you Mike Masnick even though you often comment on his writings.

If that sounded patronizing, that wasn't my intention. I just see no reason to refer to entities as anything other than what they are. Especially because ASCAP/BMI doesn't represent record labels...at all! It's misleading for the sake of being inflammatory...uncool!

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I've tried taking that route, but it just leads to unwieldy sentences fragments like "RIAA, MPAA, ASCAP, BMI, etc."

It doesn't matter who these group represent. What matters is their behavior with regards to the world at large. And when it comes to that, they are often all operating from the same playbook. So why isn't it appropriate to refer to them collectively in that context?

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See my other comment for great detail about why this is about SoundExchange, labels, and the RIAA. Your assumption about ASCAP/BMI is erroneous and based on a misunderstanding of what "performance" means in this context. It is specifically referring to the public performance of a sound recording, which currently exists under the quite clearly named Digital Performance Right in Sound Recording act. Those royalties are collected by SoundExchange, and paid to copyright holders of recordings -- not to ASCAP/BMI & songwriters

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I didn't "misunderstand". I misinterpreted because the reference was ambiguous. Mike never referred to the above Act. Had he done so, I would have properly interpreted what he meant by performance.

As I wrote bellow. When a person refers to performance royalty without any qualification, the base assumption is that they are talking about the performance of the musical work, not the sound recording. The former right predates the latter (for obvious reasons) and when unqualified, performance refers to the underlying work. This is standard.

Again, as I wrote bellow, I jumped the gun and I apologize to Mike for that. The ambiguity led to a misinterpretation on my part.

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Actually, this was about a bumping up the royalty rates for cable and satellite providers have to pay, correct? to quote fron the article above...
"...thanks to Rep. Jerry Nadler proposing a music royalty bill that would effectively bump up the rates that cable and satellite radio stations have to pay to make them more aligned with the insanely high rates that internet streamers are supposed to pay (rates so high, and set by a group of judges who don't appear to know what the internet is half the time, that no real business can be built off of them)."

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The Copyright Royalty Board, which is appointed by The U.S. Library of Congress, has entrusted SoundExchange as the sole entity in the United States to collect and distribute these digital performance royalties on behalf of featured recording artists, master rights owners (like record labels), and independent artists who record and own their masters.

SoundExchange started out as a division of the RIAA and was later spun off as an independent organization; yet that "independent" organization has on its Board of Directors two representatives from the RIAA and six representatives who are RIAA members (including the four largest music labels: Sony, EMI, UMG, and Warner).

SoundExchange is a founding member of the musicFirst lobbying coalition (in a somewhat controversial situation of a non-profit funding political lobbying), which is one of the primary advocates of the "performance rights" interests.

"Either that or he's unaware that the RIAA (in this case) has no interest and definitely isn't doing ASCAP and BMI a 'favor' by lobbying on their behalf..."

Perhaps you could express your complaint more clearly, because Mr Masnick made no mention of either of those two collection agencies -- appropriately so, as apparently neither BMI nor ASCAP has any involvement with the collection of performance royalties on digital recording. As to RIAA involvement in that issue, there is significant evidence suggesting a connection.

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THE RIAA HAS NOTHING TO DO WITH THE COLLECTION OF PERFORMANCE ROYALTIES!

You are absolutely, 100% wrong on this point. The "Performance Rights Act" stipulates that royalties get paid to performing artists, not songwriters. This is in addition to the rates paid to songwriters and publishers.

So the PRO's (BMI, ASCAP, and SESAC) are the ones who have nothing to do with these bills. Those entities those that hold the copyright on the underlying compositions. They do not represent those that hold the copyright on the sound recordings.

If this bill passes, the PRO'S get no extra money at all. All the money goes to the RIAA clients.

I used to subscribe to Pandora in 2010-2011 until I found out I wasn't using the service, and I used it from 2007-2010 before then as a free listener. This debate isn't new, it was center-stage back in 2007 when the original totally retarded rates came into effect. And now they want to make it WORSE? Could we at least try to make the corruption less blatant?

Disingenuous Mike...They're not bailing out the RIAA...

Look, The RIAA is a non-profit organization. It isn't them getting "bailled out"...

Also, the RIAA has nothing to do with performance rights...That's ASCAP and BMI. come on!

On the substantive issue, I don't know that this law is a good idea. I'm also not sure that it's a bad idea.

We have a model here in Canada where copyright collectives apply to the Copyright Board for tariffs on different types of uses. Radio broadcast (as well as Internet radio broadcast) are covered by tariffs and wouldn't you know it, our radio stations are still alive!

The reason why this may not be the worst idea is because while imperfect (and I have my criticisms of them), collective licensing societies usually get a large part of their revenue to the artists. These royalties are accrued independent of how favorable or unfavorable your record deal is.

Collectives like ASCAP and BMI should be able to collect for the performance of their catalog on the radio. I mean...why not?

Why would the RIAA be lobbying for a "Performance Rights Act"? THEY DON'T COLLECT PERFORMANCE ROYALTIES!

You have to inform yourself a little better Mike. This one is just sad...

Does this draft bill remunerate the sound recording makers or the musicians/song writers?

I can't get a text of the draft bill so I can't tell. But Mike certainly hasn't made that clear. Everything I've read so far leads me to believe that it would be ASCAP/BMI administering these royalties, not the RIAA ro SoundExchange.

If you say "performance royalty" without qualifying it, it leads one to believe your talking about performance rights on the composition. But of course Mike didn't specify that either.

It was about the public performance of recordings, summarized well by Wikipedia:

Under the [existing] Digital Performance Right in Sound Recordings Act, sound recordings have a limited public performance right in digital transmissions, such as webcasting.[2] This bill would expand the performance right to cover terrestrial broadcasts, such as AM/FM radio.

Those royalties are collected by SoundExchange. That bill's biggest backer was the RIAA, largely through musicFIRST. You can also see them supporting it on their own blog:

Nadler's new bill is not identical, but accomplishes much of the same stuff -- and is still expanding recording royalties collected by SoundExchange. It is, of course, also strongly backed by musicFIRST:

"The only real solution is for Congress to create a legal performance right, but raising terrestrial radioís digital royalties is an important interim step towards that goal. By effectively reimbursing performers for lost income, Rep. Nadlerís draft legislation recognizes the injustice of denying fair pay for airplay," said Ted Kalo, executive director of the musicFIRST Coalition, in a statement. "The discussion draft proposes a 21st century marketplace standard that treats artists and platforms fairly and equally."

Perhaps more of this background information could have been included in the post but, as you can see, it's all out there -- and the conclusions you've jumped to are incorrect.

You're right and I was wrong. It is about the performance of sound recordings. Although, quite frankly, I wasn't the one reporting a story here.

Like a lot of other people, this post confused me. I read every word twice and looked at all the sites Mike linked to. I also did a search of my own. It seems the other sites that have covered this issue wrote much the same thing as Mike (hence why he cites them but doesn't add anything).

I've read the text of the old proposed act. You're absolutely right, it covers performances of sound recordings. But you must understand that this article was totally ambiguous. How is one supposed to know? When I hear the term "performance royalty" without any further qualification, it means performance of the musical work, not the sound recording. There are historical reasons for this...one significantly predates the other.

I'm a big boy and can admit when I jump the gun. That said, my original criticism remains valid!

Thank you, Leigh! I was reading these comments and couldn't help but feel this entire argument was counter-intuitive. One cannot claim another is misinformed after admitting their only source of information is the one from whom they have just claimed is misinformed. That is called 'denial': (from merriam-webster) "a psychological defense mechanism in which confrontation with a personal problem or with reality is avoided by denying the existence of the problem or reality."

All of his subsequent comments further indict him as a troll. He states that he read the article twice, read all the links provided in the article and then 'did his own search'. In other words, he had little or no information on this topic prior to reading Mike's article, then only after reading it, sought to disprove it and proceeded to draw both mis- and un- informed conclusions on the topic while accusing Mike of doing the exact same thing. His comments continuously claim Mike's article is ambiguous while ambiguously citing the reason as a difference between acronyms of organizations, a minor point to the larger topic. Finally, he admits to his error, only after being called out, but does not cede his point, instead choosing outright denial and maintaining his 'victory' (grow up).

From Wikipedia: Troll (Internet): In Internet slang, a troll is someone who posts inflammatory, extraneous, or off-topic messages in an online community, such as a forum, chat room, or blog, with the primary intent of provoking readers into an emotional response or of otherwise disrupting normal on-topic discussion.

Therefore, with no power whatsoever to do so, I both create and present this commenter with the Repentant Troll Award. "Because its one thing to troll then repent but its a greater feat to troll and repent whilst still trolling."

Re: More Inequity

Hire a lobbying firm with former congressmen and staffers on the payroll. Have them hold large fundraisers for the top members of the committee that oversees the area of your concern. Send checks to these people as well. Figure out how you can get want you want and stil have let the representatives explain it as protecting the children, national security, or supported small business owners. Also look at getting it attached to a major defense spending bill or congressional pay-raise bill.

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Please, selling stuff is so last decade, all you have to do now is throw together a vaguely worded copyright, add 'on the internet' to it somewhere to get it accepted, and then start sending out some shakedown letters to carefully handpicked targets(opening the phonebook to a random page and picking a name at random is the current accepted method).

Voila, instant cash for no real work needed!

And now to see how many trolls I can sucker in to agreeing before this last line.

Weird Math

As it stands now, the rates are so damaging that Pandora -- the top player in the space -- has made it clear it may never be profitable. Yes, never. Nadler's bill would effectively make sure that no one else in that market would be profitable either. The end result? Many of these services don't exist or never get started. That would actually mean fewer services, fewer listeners and lower royalties.
It looks like record label folks and the people at RIAA went to the EA School of Business Mathematics (yes the game company). Where else can one learn that it's better to have 1 person $100 than for 1000 people to pay $10?

this fucking idiot needs stringing up by the bollocks! has he got no sense at all? does he think that there will be no other industries that demand to be 'bailed out' if the RIAA are? why doesn't he do the opposite and insist that they talk to and listen to what customers say and want from the industry before trying to save them from themselves and their own complete failure to join the digital world. how the fuck do these absolute fucking morons ever get into the political arena in the first place, let alone become senators? my prick has more sense than this. at least it knows when to keep it's mouth shut and back away to a safe distance before making a mistake it could regret for a very long time!!

Its a new tax on all newborn children. Said child may here some music at some point and they did not pay for that music. This tax is levied against the parents and should be equal to no less than 10% of the fee paid for said birth.

ASCAP and BMI represent composers. Since composers are artists, you're not wrong when you say that. They don't, however, represent performers (except for those who happen to also be composers). In fact, ASCAP and BMI at least initially opposed the Performance Rights Act for fear that it would either cut into their royalties by reducing the number of radio stations playing their members' music and/or would cheapen their work by giving the performers far higher royalties than what their members get.

The current royalty structure requires webcasters (as well as cable and satellite radio) to write checks to ASCAP, BMI and SESAC while writing a separate check to SoundExchange. SoundExchange currently takes a percentage of the royalties paid for "administrative functions" and splits the remainder 50/50 between the artists and the record labels.

The Interim FIRST Act doesn't change the mechanics of the royalty payments. It simply changes the standard used to determine what those payments will be. Section 801(b) requires, among other things, to consider damage done to the industry. Interim FIRST would put everyone on the "willing buyer/willing seller" standard, which is guaranteed to substantially raise everyone's rates.

Solution

Why not encourage them to do what they want, let them raise rates by 300%, or even 500%, on all forms of content, movies /music/e-books/airplay cost etc.

Then there content will be more valuable to them, when they release a movie they can charge a minimum of $50 for the dvd and up the price for an e-book to $20 and a music track to $5. Yes they will lose a lot of customers but hey if they cannot afford it they do not have to consume it.Most if not all radio stations will be unable to stay onair with the costs involved so it will make space for others to improve there signal, there will be no internet radio's but hey why have them, let the content providers up the prices so high that only a minimum amount of people can afford it.

We should have left the studios to change the laws exactly as they wanted and let them destroy themselves, at least then they would be half dead by now and maybe realise that the customer holds the purse strings.
And yes some people would pay for the content at a raised price, maybe not many but there are a good few families that could afford to buy 20 tracks a month or a few movies to watch a month. They might lose 90% of there customers and have to close 90% of the theatres but hey they will still be making money, and the 90% of the population that cannot afford there content will look elsewhere and I am sure find other forms of entertainment to entertain themselves with.

I think the big mistake we keep making is even considering the studios and artists, I mean they just want our money, they don't care if we can afford to pay, they only want the rich to consume there content , well I for one say let them do what they want, we will all still torrent things we really want to consume, they will get the high prices on there music, and everyone will be happy.
I don't know why people are so interested in the studios getting a better business model which involves free, leave them to it , they will soon hang themselves if we give them enough rope.
We should be calling for them to be allowed to change copyright as they see fit, exactly how they want. I mean most of the population disregards copyright now as being unfair so why encourage them to make it better, let them do what they want , don't advise them don't discuss it with them, just torrent whatever you can't afford and everyone will be happy, just don't let them try to take my freedom away from me, my freedom to share with others and all will be fine.

Re: So how much...

You donate money to a Political Action Committee, such as the one formed for Rep. Nadler, Jerry's PAC. Afterward, the politican is said to be in "political debt" to you, which is usually repaid with legislation favorable to you (and/or unfavorable to your enemies).

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It's no less sane than having states able to make up the rules that (dis)allow people to exercise their Constitutional right to vote in Federal elections, or have those votes go through an electoral college that may completely ignore what they voted.

best option is for radio stations to stop playing music altogether. make sure the public know exactly why it's going to happen and when and that the only reason for it is, yet again, the greed of the entertainment industries. i doubt if it would take more than a few weeks before there was a massive plea from those industries to start playing music again as before. but i could be wrong. they are really good at kicking themselves in the balls whilst blaming dirty fighters for the injury

Y'all asked: "...can anyone explain just why the government is bailing out the RIAA in the first place?"

Answer: Because our so-called "elected officials" (who are supposed to work for us) have been bribed and paid for by the aforementioned MAAFIA, and are now working for the toward yet another taxpayer ripoff.

I mean, the banks did it; why shouldn't they?? It's all free money, they have a right to steal it too!!

Royalties straight to Musicians

This blog post fails to understand that performance royalty rates are not paid only to record labels, but also to independent artists that promote themselves. Internet radio, like Pandora, is not obligated to play specific music - as with terrestrial radio, ClearChannel, and top 40s. In fact, the music selected is based on the userís preference and their music library is vast. Despite this bill, the RIAAís profits will continue to decrease as more musicians are choosing to produce, publicize, and distribute their own music on the Internet. As such, these performance royalties will be going straight to the musicians themselves, as long as they are not signed with a label. I think this bill is a great way for musicians (not signed with a label) to receive some form of income in addition to live music and merchandising. Considering royalties for publishing and songwriting is managed by ASCAP, BMI, and SESAC, performance royalties may be the only way that independent artists are able to receive 100% of the profits for having their music played.